US President Donald Trump has announced a new 25% tariff on all imported cars, threatening UK producers’ largest single export market.

Signing an executive order, Mr Trump said the tax would kick in on 2 April – what he has called “liberation day”.

This is when all his retaliatory import tariffs are supposed to take effect, but they have been delayed before.

The move ratchets up the global trade war Mr Trump himself kicked off at a time when his administration is battling the continued fallout from the Signalgate security breach in Washington.

Speaking late on Wednesday, Mr Trump said the proposal: “Will continue to spur growth. We’ll effectively be charging a 25% tariff.”

Similar duties on all car part imports are expected to follow in May, complicating the effects as even American car makers source components from around the world – meaning they could also face higher costs and lower sales.

There was swift condemnation of the latest threats, especially within countries worst affected in both volume and value terms including Mexico, Canada, South Korea and Germany.

The UK car industry also faces further damage from the tariffs at a time when it is already weakened by poor demand for new vehicles, domestically and abroad. Cheaper competition from China is also weighing heavily globally.

Manufacturers such as Jaguar Land Rover, Bentley, Aston Martin and Rolls-Royce stand to be worst affected.

Official data shows that the US is the UK car sector’s largest single market by country, accounting for £6.4bn worth of car exports in 2023. That is 18.4% of the total.

Again, however, the UK government signalled it would not retaliate – mirroring its response to the tariffs on steel and aluminium imposed globally by the Trump administration earlier this month.

While chancellor Rachel Reeves condemned the fresh protectionism, she told Sky’s Wilfred Frost: “We’re not at the moment in a position where we want to do anything to escalate these trade wars.”

The remark will be seen as a nod to continuing UK trade deal talks with the US.

Listed European car and car parts manufacturers saw further steep declines in their share prices in Thursday trading as the plans drew widespread international criticism.

Canadian Prime Minister Mark Carney called it a “direct attack” on Canadian workers.

Even Trump advisor Elon Musk, the Tesla boss, admitted in a post on his X platform that the hit to his company would be “significant”.

During his second term, Mr Trump has used tariffs frequently as a trade weapon.

He cited plans from South Korean car maker Hyundai to build a $5.8bn (£4.5bn) steel plant in Louisiana as evidence the economic measures would bring back manufacturing jobs.

Even American and foreign firms already with domestic plants still rely on Canada, Mexico and other countries for parts and finished vehicles – meaning prices could increase and sales decline as new factories take time to build.

Tariffs are a key part of Mr Trump’s efforts to reshape global trade relations.

He plans to impose what he calls “reciprocal” taxes on 2 April that would match tariffs and sales taxes levied by other nations.

He has already placed a 20% tax on all imports from China.

Similarly, he placed 25% tariffs on Mexico and Canada, with a lower 10% tariff on Canadian energy products in addition to the duties on all steel and aluminium imports, including those from the UK.

Sky News understands the UK government is continuing to engage with the US on a trade deal and remains hopeful an agreement could be made before the tariffs come into force, but may retaliate if deemed necessary at a later date.

Mike Hawes, the chief executive of the UK car industry lobby group the SMMT, said: “Today’s announcement by President Trump is not surprising but, nevertheless, disappointing if, as seems likely, additional tariffs are to apply to UK made cars.

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“The UK and US auto industries have a long-standing and productive relationship, with US consumers enjoying vehicles built in Britain by some iconic brands, while thousands of UK motorists buy cars made in America.

“Rather than imposing additional tariffs, we should explore ways in which opportunities for both British and American manufacturers can be created as part of a mutually beneficial relationship, benefitting consumers and creating jobs and growth across the Atlantic.

“The industry urges both sides to come together immediately and strike a deal that works for all.”

Lynn Calder, CEO of INEOS Automotive said: “This is what happens when politicians sit on their hands. As a growing EU-based automobile brand, we are vulnerable to tariffs, and we need our politicians to support our business, our jobs and our economies. We need urgent and direct political intervention on tariffs.

“Fortunately, we have been planning for tariffs but there is only so much we can do to protect US customers from price rises.”